- (1.) Since the issue involved in all the aforesaid appeals are common, we, for the sake of convenience proceed to decide all these appeals by this consolidated order. Interest Tax Appeal Nos. 1 2/Alld/1996 (A.Y. 1992-93 1993-94-Sahara India Savings Investment Corpn. Ltd.) :
(2.) Ground Nos. 1 to 6 of Interest Tax Appeal No. I (Alld) of 1996 and Ground Nos. 1 to 4 of Interest Tax Appeal No. 2(Alld) of 1996 pertains to the issue whether the appellant-company, which is a Residuary Non Banking Company, can be brought within the purview of the Interest Tax Act and whether it can be considered a Miscellaneous Finance Company as defined in section 2(5B) of the Interest Tax Act, as amended by the Finance (No. 2) Act of 1991.
(3.) We have heard the parties and the brief facts necessary for the decision of the issue are as under : 3.1 Brief Facts : The appellant-company was incorporated on 11-8-1987 and its main objects are reproduced in para-7 Page 4 of the Commissioner (Appeals)s order for the assessment year 1992-93. The objects as per the memorandum are in confirmative with the Residuary Non Banking Company (Reserve Bank) Directions, 1987. 3.2 Reserve Bank classified the appellant-company as a Residuary Non Banking Company (R.N.B.C.) within the meaning of R.N.B.C. Directions, which were notified by the government vide Notification No. DFC.55/DC(O)-87 dated 15-5-1987 and the assessee was informed of the same as per letter dated 16-9-1987. 3.3 When the Interest Tax Act of 1974 was amended by the Finance (No. 2) Act of 1991 with effect from 1-10-1991 a Residuary Non-Banking Company was not included within the definition of a Financial Company as defined in section 2(5B) . 3.4 A Residuary Non Banking Company was included in definition of the Financial Company in section 2(5B) by inserting clauses (va) by Finance Act of 1992 w.e.f. 1-4-1993. The explanatory memorandum to the Act in Paragraphs 55.3 to 55.5 stated as under : "55.3 When the Interest Tax Act was revived last year, the intention was to cover all Non-Banking Financial Companies. It has, however, been found that there are a number of finance and investment companies which earn substantial income from interest on loans and advances are yet not covered by the definition given in section 2(5B) . These companies received deposits under schemes or other arrangements, in one lump sum or in instruments by way of contributions or subscriptions or by sale of units or certificates of other instruments. The Reserve Bank of India being, vide Notification No. DFC.55/DG(O)-87 , issued on 15-5-1987 treated such financial companies as Residuary Non Banking Companies. 55.4 In view of the fact that, governments intention is to impose tax on the gross amount of interest earned by all banks, financial institutions and non banking financial companies in respect of loans and advances made in India, the Finance Act has included, in the definition of Financial Company, all Residuary Non Banking Companies. 55.5 This amendment will take effect from 1-4-1993 and will accordingly, apply in relation, to assessment year 1993-94 and subsequent years." 3.5 The assessing officer, despite the claim by the appellant-company that in the assessment year 1992-93 the appellant-company being a Residuary Non Banking Company, did not fall within the provisions of Interest Tax Act in paragraph-6 of the assessment order, after referring to the sources of interest income of the company held that company was a Miscellaneous Finance Company as defined in section 2(5B)(vi) of the Interest Tax Act. 3.6(i) The Commissioner (Appeals) in Para 7 of the appellate order referred to the objects in the memorandum of the company and held that second object fell within the expression of investment company. This was despite the fact that second main object in the memorandum of association of the company reads are under : "To buy, sell, invest or otherwise deal in securities, bonds or fixed deposits issued by any institution, body corporate, corporation, established or constituted under any central or state enactments or in other securities in which the company may be required to invest under any law in force." 3.6(ii) The Commissioner (Appeals) also referred to definition of investment company in the Finance Act, despite the fact that an investment company is defined in section 2(5B)(ii) of the Interest Tax Act as follows : "an investment company, that is to say, a company which carries on, as its principal business, the acquisition of shares, stock, bonds, debentures, debenture stock, or securities issued by the government or a local authority or other marketable securities of a like nature." 3.6(iii) Applying the definition of an investment company under the Finance Act, the Commissioner (Appeals) held that this definition apply to the appellant company. The Commissioner (Appeals) thereafter referred to the definition of a loan company as defined in section 2(5B)(iv) of the Interest Tax Act, which reads as under : "a loan company, that is to say, a company (not being a Company) referred to in Sub-clauses (i) to (iii) which carries on, as its principal business, the business of providing finance, whether by making loans or advances or otherwise." 3.6(iv) In view of above, the Commissioner (Appeals) was of the view that this definition applies to the appellant-company. The Commissioner (Appeals) was of the view that since almost 50 per cent of the gross income was from securities and dividends, the appellant had been rightly treated by the assessing officer as a Miscellaneous Finance Company. 3.6(v) The above view of the Commissioner (Appeals) that the appellant is Miscellaneous Non-Banking Company was taken despite the fact that in its appellate order in para-7 on page-3 he has stated as under : "I have duly considered the submissions urged on behalf of the company. It claims to be covered in the category of "Residuary Non-Banking Companies" as per rules set up by R.B.I. That being so, it claims that it is beyond the scope of section 2(5B) of the Interest Tax Act for the assessment year 1992-93 as the said extended definition of Finance Company" came only in assessment year 1993-94. So far as the prospective operation of the definition is concerned, I agree with the contention of the learned counsel.";